The equity market tumbled on Monday as leading central banks are scheduled to hold meetings to discuss the prospect of monetary tightening soon. Without the Fed’s support, the fear of future trading unnerve investors accustomed to a great stimulus feeding the market.
⌛️Markets Expectation🕹
There is a general sentiment among investors that the Fed will lay out plans to remove its bond-buying program faster, which could lead to the path of an early interest rate hike. A combo that isn’t helping equity valuation.
Some economists are expecting 2 rate hikes in 2022. With the Fed pumping less money into the financial markets, there tend to be less liquidity bidding for riskier assets. Likewise, as we expect slower growth in 2022, the duo combo tends to put the market on edge.
🧨Tech Stocks bear the blunt⛽️
As discussed, technology stocks tend to see their future profit in present terms diminishes in value are likely to be hit the hardest. Smaller cap growth stocks face the same fate since many aren’t profitable in the first place.
🎉Treasury: Safe Haven, for now💵
Investors who are seeking safety will shift to purchasing Treasury bonds. So we can see the 10-year Treasury yield fell. The environment also favours the more defensive sector, which is less economically sensitive, such as the utility sector (XLU, ETF) and Consumer Staples (VDC, ETF).
With about 20 central banks meeting this week, it is clear the volatility is on the rise and that the impact of Omicron on the background unsettle most investors.
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See you in our next edition. Cheers,
Pika Nat.
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